Seattletimes article on mentions this thread. I think the article was posted in other newspapers (Tampa Tribune?).
seattletimes.com
Old scams, new twists as investors take
to the Internet
by Ted Jackovics
Knight Ridder Newspapers
By day, he's Jeffrey Mitchell, president of an insurance software
company in the tiny New York suburb of Westport, Conn.
By night, he's Jeffrey Mitchell, cybervigilante.
That's night as in FBN (Fly By Night) Associates, a grass-roots
assemblage of two dozen brokers, ex-brokers, and even a writer
and art historian.
Only a few have met in person. But they gather daily on a popular
investors' Web site - the Silicon Investor - to examine stock
offerings they think are suspicious.
Cybervigilantes make up a small slice of a growing movement to
scrutinize investment information on the Internet. These
cybersleuths talk about anything from the experience of a
company's executives to whether they think someone promoting a
stock is telling the truth or getting paid to tout it.
Other sources take a more structured approach, including
stockdetective.com, produced by a Florida financial information
services company with pithy features like "Stinky Stocks" and the
"Red Light District."
And at the far end of the cybersleuthing spectrum is the U.S.
Securities and Exchange Commission's new and expanding Internet
Enforcement Division.
But the SEC sometimes moves at the speed of a glacier, Mitchell
said, because of the legal process that binds its operations. The
SEC has filed more than 80 charges since 1996, although it gets 100
to 300 Internet trading complaints a day.
That gives cybervigilantes plenty to do. The high volume of Internet
information and transactions provides them with numerous
opportunities to ply their unpaid, unconventional roles.
Their posts appear to be drawing broader notice, including some
that claim cybervigilantes bash companies and then profit by selling
short - a bet that the price of a stock will decline.
Mitchell and two others also are being sued by Business Wire after
creating a press release about a new company purporting to sell
pieces of the Internet - which is in the public domain and not for
sale.
He said it was the latest in a series of annual April Fool's hoaxes to
show how easily some investors can be buffaloed. FBN collected
no money through the gag, but they received more than 1,700
inquiries asking how to invest up to $100,000.
"We are not afraid to speak out and call attention to scams,"
Mitchell said. "It's amazing people are so gullible. They think if it's
posted (on the Internet) it must be OK, even though they don't
know who they are dealing with."
The cybervigilantes share a trait common to many who post
information on the Internet: a zeal to protect their identities.
Nearly all of them write comments under anonymous computer
sign-ons rather than their real names.
The cybervigilantes often have been "flamed" at Silicon Investor's
no-holds-barred chat area referred to as "The Death Threat
Thread."
They attribute the acrimony to shareholders whose stocks have lost
ground after cybervigilante challenges.
The cybervigilantes' impact is difficult to document, and the SEC
does not reveal what prompts its investigations.
But the agency suspended six over-the-counter bulletin board
stocks on Jan. 29, four days after a Nevada cybervigilante, who
refers to himself online as Steve Pluvia, drew attention to four of
them on Silicon Investor.
Pluvia noted the price of the stock of one of the companies, Citron,
had soared in less than a month and found similarities in the name
of a person involved in two of the companies, deepening his
curiosity.
The SEC ordered a 10-day suspension of trading of Citron, which
the SEC identified as a Denver-based Internet marketing company.
The SEC noted questions raised about the "adequacy and accuracy
of publicly disseminated information," including business prospects
and future earnings.
Citron issued a statement Jan. 29 that allegations appear to be
derived from Pluvia, acting as a catalyst for short-selling.
Another FBN Associates intervention that preceded an SEC stock
suspension began with posts last summer about a mining company
called Mountain Energy.
Janice Shell, a resident of Italy who is a co-defendant with Mitchell
in the Business Wire lawsuit, called attention on Silicon Investor to
the mining company's operation. The mining company's stock
plunged to a fraction of its price and the SEC suspended trading.
The company could not be reached for comment. The Bloomberg
wire services show both Citron and Mountain Energy resumed
trading after their suspensions.
The SEC won't reveal whether any company whose trading has
been suspended is under investigation, spokesman John Heine said.
A company can resume trading if the SEC believes the company
meets the points raised in the SEC suspension.
"We take tips from anyone," Heine said, without disclosing how
effective any particular source might be.
"People who lost money on the stock hated us," Mitchell said. "But
we got respect, too."
Fly By Night Associates began a little more than two years ago
when some fellow computer programmers saw companies claiming
fully automated Y2K solutions.
"We thought they were ridiculous, but instead of calling them frauds
or scams we started to joke about it," Mitchell said. "That led to
using humor and parody to express a point."
These days Mitchell, married and the father of two children, works
out of his home. He's most active online between 11 p.m. and 3
a.m., after a Yankees game and before getting five hours of sleep.
During the day, he might put in another two hours on Silicon
Investor, which became so popular its founders sold it for $35
million last year to a company in which Microsoft co-founder Paul
Allen now has a heavy stake.
"I don't make any money off it," Mitchell said. "I'm considering
what would interest me. It's sort of like detective work. But instead
of reading a book with the answer on Page 250, I'm doing it in real
life."
FBN Associates is doing something quite clever, serving the public
good by using parody as a teaching device, said Kevin Lichtman, a
former stockbroker who is president of FinancialWeb.com, the
company that operates stockdetective.com and other sites.
"People just don't know what they don't know about investing,"
Lichtman contends, recalling how he recently flew into Orlando
next to a woman who said she'd made $7,000 on that
"Amazonthingee."
The need for investors to take responsibility also is at the core of
the SEC's activities, even while it is stepping up enforcement
efforts with plans to double its Internet force of 125 attorneys,
accountants and analysts set up in October.
"I encourage investors to take what they see over chat rooms not
with a grain of salt, but with a rock of salt," SEC Chairman Arthur
Levitt said earlier this month.
Mitchell agrees.
"Our little comedy troupe ended up becoming a cybervigilante
group, not by design, but it's evolved that way. We've just gotten
emboldened to do it more aggressively."
Copyright © 1999 Seattle Times Company |
